The 2022 balance sheet of Dyrdek’s Skate Shop, Incorporated, showed long-term debt of $6 million, and the 2023 balance sheet showed long-term debt of $6.4 million. The 2023 income statement showed an interest expense of $160,000. What was the firm’s cash flow to creditors during 2023?

Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.

To find the firm's cash flow to creditors, we use the following formula:

\[
\text{Cash Flow to Creditors} = \text{Interest Paid} - \text{Net New Borrowing}
\]

### Step 1: Calculate Net New Borrowing
Net new borrowing is the change in long-term debt from 2022 to 2023.

\[
\text{Net New Borrowing} = \text{Long-term Debt in 2023} - \text{Long-term Debt in 2022}
\]
\[
\text{Net New Borrowing} = 6.4\ \text{million} - 6.0\ \text{million} = 0.4\ \text{million}
\]

### Step 2: Calculate Cash Flow to Creditors
Now, using the interest expense of $160,000 and the net new borrowing:

\[
\text{Cash Flow to Creditors} = \text{Interest Paid} - \text{Net New Borrowing}
\]
\[
\text{Cash Flow to Creditors} = 160,000 - 400,000
\]
\[
\text{Cash Flow to Creditors} = -240,000
\]

So, the firm's cash flow to creditors during 2023 was **-$240,000**.

Would you like further details or explanations? Here are 5 related questions to expand your understanding:
1. What is the significance of a negative cash flow to creditors?
2. How do companies typically manage their long-term debt?
3. What other components make up a company’s cash flow statement?
4. How does interest expense affect a company's net income?
5. How does cash flow to creditors relate to the overall financial health of a business?

**Tip:** Always check for changes in long-term liabilities to assess new borrowings or repayments when analyzing cash flows.

The 2022 balance sheet of Dyrdek’s Skate Shop, Incorporated, showed long-term debt of $6 million, and the 2023 balance sheet showed long-term debt of $6.4 million. The 2023 income statement showed an interest expense of $160,000. What was the firm’s cash flow to creditors during 2023?

Learn how to calculate the cash flow to creditors for Dyrdek's Skate Shop in 2023 using interest paid and changes in long-term debt. The problem applies key concepts in corporate finance, specifically cash flow analysis. Suitable for undergraduate finance or accounting students.

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